412 Federal Register / Vol. 79, No. 2 / Friday, January 3, 2014 / Notices 

b. Is there an ‘‘intrinsic’’ value to a 

performance of a sound recording that 

is omitted if a percentage of revenue 

royalty rate were to be adopted? 

In Web II, the Judges expressed a 

concern that a percentage-of-revenue 

based royalty rate would fail to capture 

the ‘‘intrinsic’’ value of a performance of 

a sound recording. Id. The Judges in 

Web IV are interested in the 

Participants’ understanding of the 

‘‘intrinsic’’ value, if any, of a 

performance of a sound recording. 

Accordingly, the Judges invite the 

Participants to include, in their 

proffered evidence, testimony, and/or 

arguments, a discussion of their 

understanding of the ‘‘intrinsic’’ value, 

if any, of a performance of a sound 

recording, and how it might not be 

embodied in a royalty rate calculated as 

a percentage of webcaster revenue. 

c. Would a royalty rate calculated as a 

percentage of webcasters’ revenue be 

‘‘disproportionate’’ to webcasters’ use of 

sound recordings? 

In Web II, the Judges also expressed 

concern regarding whether a disparity 

could arise between a royalty rate 

calculated as a percentage of webcaster 

royalty and webcaster use of sound 

recordings. Id. The present Judges share 

that concern. 

Specifically, the Judges inquire 

whether ‘‘disproportionality’’ could 

arise if some webcasters declined to 

attempt to maximize profits, and instead 

attempted to maximize market share. 

Licensors then would suffer the 

‘‘opportunity cost’’ of foregone 

revenues. Cf. William Baumol, The Free 

Market Innovation Machine 221 (2002) 

(licensors must consider not only the 

marginal dollar cost, but also the 

‘‘opportunity cost’’ of granting a 

licensing to a given licensee). As noted 

by one of SoundExchange’s economic 

experts during the proceedings in Web 

III, Dr. Janusz Ordover, both of these 

reactions—profit maximization and 

market share maximization—would be 

possible outcomes. Ordover WRT at 

¶¶ 25–26. 

The Judges also seek evidence, 

testimony and argument on whether this 

risk could be mitigated by combining a 

percentage-of-revenue based royalty rate 

with a significant minimum fee. See 

H.R. Rep. No. 105–796, at 85–86 (1998) 

(Conf. Rep.) (‘‘A minimum fee should 

ensure that copyright owners are fairly 

compensated in the event that other 

methodologies for setting rates might 

deny copyright owners an adequate 

royalty. For example . . . a minimum 

fee [should be set] that guarantees that 

a reasonable royalty rate is not 

diminished by different types of 

marketing practices or contractual 

relationships. . . . [I]f the base royalty 

for a service were a percentage of 

revenues, the minimum fee might be a 

flat rate per year (or a flat rate per 

subscription per year for a new 

subscription service)’’ (emphasis added). 

Accordingly, the Judges invite the 

Participants to include, in their 

proffered evidence, testimony, and/or 

arguments, a discussion of the problem 

of ‘‘disproportionality’’ between a 

royalty rate based upon a percentage of 

webcaster revenue and the use by 

webcasters of sound recordings, 

including the details identified supra. 

Petitions To Participate 

Parties with a significant interest must 

file Petitions to Participate (PTP) in 

accordance with 37 CFR 351.1(b)(1). 

PTPs must be accompanied by the $150 

filing fee in the form of check or money 

order payable to the ‘‘Copyright Royalty 

Board’’; cash will not be accepted. 

The Judges will address scheduling 

and further procedural matters after 

receiving PTPs. 

Dated: December 20, 2013. 

Suzanne M. Barnett, 

Chief Copyright Royalty Judge. 

[FR Doc. 2013–30916 Filed 1–2–14; 8:45 am] 

BILLING CODE 1410–72–P 

LIBRARY OF CONGRESS 

Copyright Royalty Board 

[14–CRB–0001–WR (2016–2020)] 

Determination of Royalty Rates for 

Digital Performance in Sound 

Recordings and Ephemeral 

Recordings (Web IV) 

AGENCY: Copyright Royalty Board, 

Library of Congress. 

ACTION: Notice announcing 

commencement of proceeding with 

request for Petitions to Participate. 

SUMMARY: The Copyright Royalty Judges 

announce the commencement of the 

proceeding to determine reasonable 

rates and terms for two statutory 

licenses permitting certain digital 

performances of sound recordings and 

the making of ephemeral recordings for 

the period beginning January 1, 2016, 

and ending on December 31, 2020. A 

party wishing to participate in this rate 

determination proceeding must file its 

Petition to Participate and the 

accompanying $150 filing fee by the 

deadline in this notice. 

DATES: Petitions to Participate and the 

filing fee are due no later than February 

3, 2014. 

ADDRESSES: Participants must submit a 

Petition to Participate in a hard-copy 

original, with five paper copies and an 

electronic copy in Portable Document 

Format (PDF) on a Compact Disc, along 

with the $150 filing fee, to the Copyright 

Royalty Board by either mail or hand 

delivery. Participants may not submit 

Petitions to Participate and the $150 

filing fee by an overnight delivery 

service other than the U.S. Postal 

Service Express Mail. If participants 

choose to use the U.S. Postal Service 

(including overnight delivery), they 

must address their submissions to: 

Copyright Royalty Board, P.O. Box 

70977, Washington, DC 20024–0977. If 

participants choose hand delivery by a 

private party, they must deliver the 

submissions to the Library of Congress, 

James Madison Memorial Building, LM– 

401, 101 Independence Avenue SE., 

Washington, DC 20559–6000. If 

participants choose delivery by a 

commercial courier, they must deliver 

the submissions to the Congressional 

Courier Acceptance Site, located at 2nd 

and D Street NE., Washington, DC. The 

envelope must be addressed to: 

Copyright Royalty Board, Library of 

Congress, James Madison Memorial 

Building, LM–403, 101 Independence 

Avenue SE., Washington, DC 20559– 

6000. 

FOR FURTHER INFORMATION CONTACT: 

LaKeshia Keys, CRB Program Specialist, 

by telephone at (202) 707–7658 or email 

at crb@loc.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

Section 804(b)(3)(A) of the Copyright 

Act, title 17 of the United States Code, 

requires the Copyright Royalty Judges 

(Judges) to commence a proceeding to 

determine the rates and terms for public 

performances of sound recordings by 

means of an eligible nonsubscription 

transmission and transmissions made by 

a new subscription service, under 17 

U.S.C. 114, and the making of an 

ephemeral recording in furtherance of 

making a permitted public performance 

of the sound recording, under 17 U.S.C. 

112, every five years. Section 

803(b)(1)(A)(i)(III) of the Copyright Act 

requires the Judges to publish in the 

Federal Register a notice of 

commencement for a proceeding to 

determine rates and terms for the 

section 114 and 112 statutory licenses 

‘‘by no later than January 5 of a year 

specified in [section 804(b)(3)(A)].’’ The 

Judges commenced the proceeding to 

determine the rates and terms for the 

section 114 and 112 licenses for the 

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Federal Register / Vol. 79, No. 2 / Friday, January 3, 2014 / Notices 413 

1The Judges announced their final determination 

for the rates and terms for the 2011–2015 license 

period on March 9, 2011. See 76 FR 13026. A 

participant appealed the final determination in the 

United States Court of Appeals for the District of 

Columbia Circuit (D.C. Circuit) asserting that the 

Judges’ appointments violated the Appointments 

Clause, U.S. Const., article II, section 2, clause 2. 

The D.C. Circuit agreed and remanded the 

determination to the Judges. Intercollegiate Broad. 

Sys. v. Copyright Royalty Bd., 684 F.3d 1332 (D.C. 

Cir. 2012). The Judges are in the midst of their de 

novo review of the record on remand. See Order 

Following Notice of Intention to Conduct Paper 

Proceeding on Remand, Docket No. 2009–1 CRB 

Webcasting III (Oct. 22, 2013). 

2 Digital Performance Right in Sound Recordings 

and Ephemeral Recordings, Final rule and order, 72 

FR 24084 (May 1, 2007), aff’d in relevant part sub 

nom. Intercollegiate Broad. Sys. v. Copyright 

Royalty Bd., 574 F.3d 748 (D.C. Cir. 2009) (Web II). 

3Nothing in this section should be construed as 

a statement by the Judges that any evidence or 

testimony proffered will be ultimately deemed 

admissible, competent, relevant, probative, or 

dispositive as to any issue, or that the Judges will 

ultimately consider, accept, or adopt any argument 

made in response to this section. Additionally, 

nothing in this section should be construed as an 

indication that the Judges will consider ultimately 

any of these issues in any determination rendered 

by them. Finally, by soliciting information 

regarding these issues, the Judges are not indicating 

that they have reached any preliminary decisions as 

to any of these issues. 

4 Determination of Reasonable Rates and Terms 

for the Digital Performance of Sound Recordings 

and Ephemeral Recordings, Final rule and order, 67 

FR 45240 (July 8, 2002) (Web I). 

5The Judges understand the foregoing statements 

in Web I and Web II regarding price discrimination 

to explain why rates for noncommercial webcasters 

were lower than rates for commercial webcasters. 

term 2011–2015 on January 5, 2009.1 See 

74 FR 318. Thus, in accordance with 

sections 803(b)(1)(A)(i)(III) and 

804(b)(3)(A) of the Copyright Act, the 

Judges must commence the proceeding 

to determine the rates and terms for the 

period January 1, 2016, through 

December 31, 2020, by publishing in the 

Federal Register a notice of 

commencement by no later than January 

5, 2014. Today’s notice fulfills this 

obligation. 

Scope of Proceeding 

In addition to all other submissions 

and arguments required by the Act and 

the applicable regulations, and in 

addition to any other submissions or 

arguments that the Participants choose 

to make, the Judges note below certain 

potential matters that the Participants 

may elect to address in this proceeding. 

The Judges are open to receiving 

evidence, testimony, and argument 

regarding any reasonable rate structure 

that a Participant may elect to propose, 

such as, inter alia, a rate structure based 

on the number of subscribers or a 

percentage of webcaster revenue. This 

openness is consistent with the 

determination in Web II, 72 FR at 

24089,2 in which the Judges held that, 

although the record did not support a 

percentage-of-revenue based royalty, 

‘‘[t]his does not mean that some 

revenue-based metric could not be 

successfully developed as a proxy for 

the usage-based metric at some time in 

the future. . . .’’ The Judges make 

particular note of this holding in Web II 

because they recognize that, as a 

practical and strategic matter, 

participants in these proceedings 

carefully consider prior rate proceedings 

as roadmaps to ascertain the structure of 

the rates they propose. 

Pursuant to 17 U.S.C. 114(f)(2)(B), 

‘‘[i]n determining . . . rates and terms 

the Copyright Royalty Judges shall base 

their decision on . . . information 

presented by the parties. . . .’’ 

(emphasis added). Thus, the Judges are 

best served if the participants, their 

economic witnesses, and their counsel 

craft arguments in a manner that assists 

the Judges in identifying and applying 

the optimal economic analysis when 

establishing rates and terms pursuant to 

the Act. As a former federal appellate 

jurist has noted: 

The truism that judicial analysis, economic 

or otherwise, takes place only in the context 

of lawsuits between two or more parties 

imposes a practical constraint on the judge’s 

ability to use economic analysis. . . . [A] 

judge will, for the most part, be limited by 

what the parties serve up to her. 

Patricia Wald, Limits on the Use of 

Economic Analysis in Judicial 

Decisionmaking, 50 Duke J.L. & 

Contemp. Prob. 225, 228 (1987). 

Accordingly, the Judges invite 

Participants, within the written direct 

statements, written rebuttal statements, 

proposed findings of fact and 

conclusions of law, and through their 

witnesses and attorneys, as appropriate, 

to consider addressing the following 

questions.3

1. What is the importance, if any, of the 

presence of economic variations among 

buyers and sellers? 

Web II contains the following 

observation. 

In the hypothetical marketplace we attempt 

to replicate, there would be significant 

variations, among both buyers and sellers, in 

terms of sophistication, economic resources, 

business exigencies, and myriad other 

factors. 

Web II, 72 FR at 24087 (emphasis 

added). This statement echoed the 

Librarian’s finding in Webcaster I (Web 

I) 4 that a marketplace unconstrained by 

a statutory license would experience ‘‘a 

range of negotiated rates. . . .’’ Web I, 

67 FR at 45244. 

If the marketplace indeed would 

establish multiple rates, the adoption of 

a rate structure consistent with that 

result might be more realistic than a 

single per-performance rate. When such 

‘‘significant variations’’ exist, especially 

among ‘‘willing buyers,’’ each buyer 

may place a different economic value on 

a performance. To impose a rate that is 

economically appropriate for one such 

willing buyer upon any or all other 

willing buyers might not necessarily 

satisfy the statutory requirement of 

replicating the marketplace, but rather 

might be inconsistent with the rate 

structure of an actual market for sound 

recordings. Thus, the Judges invite the 

Participants to address in their proffered 

evidence, testimony, and/or arguments 

whether any economic variations among 

commercial webcasters might affect the 

selection of an appropriate rate 

structure. 

2. Should royalty rates embody any 

form of economic ‘‘price 

discrimination’’ in order to reflect the 

statutory hypothetical marketplace? 

In Web II, the Judges set forth a 

concise and accurate summary of 

market circumstances in which price 

discrimination—and therefore multiple 

prices for the same good or service— 

will arise: 

A segmented marketplace may have 

multiple equilibrium prices because it has 

multiple demand curves for the same 

commodity relative to a single supply curve. 

. . . In other words, price differentiation or 

price discrimination is a feature of such 

markets. The multiple demand curves 

represent distinct classes of buyers and each 

demand curve exhibits a different price 

elasticity of demand. . . . Typically, the 

submarket characterized by lesser price 

elasticity will exhibit a higher price. All the 

economists who testified in this proceeding, 

for both the Services and the copyright 

owners generally agreed with this 

description. 

72 FR at 24097 (emphasis added); see 

also Web I, 67 FR at 45258 (‘‘economic 

differences between . . . businesses’’ 

would cause a per-performance rate 

appropriate for one type of business ‘‘to 

overstate the market value’’ of a 

performance for another type of 

business).5

‘‘[A] seller price discriminates by 

charging different prices to buyers when 

the price difference cannot be explained 

by a cost difference in supplying the 

copyrighted work.’’ Michael Meurer, 

Copyright Law and Price 

Discrimination, 23 Cardozo L. Rev. 55, 

58 (2001); see also Jean Tirole, The 

Theory of Industrial Organization 133– 

34 (1988) (‘‘Price discrimination reflects 

differences in the mark-up of price over 

marginal cost across sales.’’); Harold 

Demsetz, The Private Production of 

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414 Federal Register / Vol. 79, No. 2 / Friday, January 3, 2014 / Notices 

Public Goods, 13 J. Law & Econ. 293, 

303–04 (1970) (‘‘There is no single price 

that can satisfy all equilibrium 

requirements . . . under the condition 

that differences in demand prices can be 

identified at relatively low cost. . . . 

[C]ompetitively produced public goods 

lend themselves to price 

discrimination.’’); Paul Samuelson, 

Aspects of Public Expenditure Theories, 

40 The Rev. of Econ. & Statistics, 332, 

336 (1958) (when attempting to price 

additional copies of public goods with 

marginal costs approximating zero ‘‘the 

easy formulas of classical economics no 

longer light our way.’’); see generally 

William Baumol, Regulation Misled by 

Misread Theory 6 (AEI-Brookings Joint 

Center Distinguished Lecture Award 

Monograph 2006) (‘‘[U]nder common 

conditions, firms will adopt price 

discrimination as their optimal strategy 

for recoupment of common costs. . . . 

[U]nder competitive conditions, the firm 

will normally be forced to adopt 

discriminatory pricing wherever that is 

feasible. Put another way, uniform 

pricing is not to be taken as the normal 

characteristic of equilibrium of the 

competitive firm.’’) (emphasis in the 

original). 

The Judges invite the Participants to 

include in their proffered evidence, 

testimony, and/or arguments a 

consideration of the potential 

applicability or inapplicability of price 

discrimination within the commercial 

webcaster segment of the market as 

well. 

3. What are the potential disadvantages 

of establishing a statutory royalty rate 

not based on a per performance royalty 

rate? 

Although there are possible 

advantages to the establishment of a 

statutory royalty rate based upon a 

structure other than a per-performance 

method, there are potential 

disadvantages as well. Accordingly, the 

Judges invite the Participants to include, 

in their proffered evidence, testimony, 

and/or arguments, information 

regarding any potential disadvantages to 

modifying or departing from a perperformance royalty rate. In response to 

this question, the Judges invite the 

Participants to consider the following 

specific sub-issues. 

a. Is it prohibitively difficult to identify 

webcaster revenues for the purpose of 

calculating a percentage-of-revenue 

based royalty rate? 

In Web II, the Judges described the 

following three areas in which potential 

problems existed in the percentage-ofrevenue rate proposals presented by the 

participants in that proceeding: (1) 

Revenue measurement; (2) revenue 

definition; and (3) auditing and 

enforcement. 72 FR at 24089–90. The 

present Judges remain concerned with 

whether those potential problems would 

affect any potential use of a percentageof-revenue based royalty rate. 

Accordingly, the Judges invite the 

Participants to include, in their 

proffered evidence, testimony, and/or 

arguments, a discussion of such 

potential problems and any proposed 

means to resolve such problems. 

b. Is there an ‘‘intrinsic’’ value to a 

performance of a sound recording that is 

omitted if a percentage of revenue 

royalty rate were to be adopted? 

In Web II, the Judges expressed a 

concern that a percentage-of-revenue 

based royalty rate would fail to capture 

the ‘‘intrinsic’’ value of a performance of 

a sound recording. Id. The Judges in 

Web IV are interested in the 

Participants’ understanding of the 

‘‘intrinsic’’ value, if any, of a 

performance of a sound recording. 

Accordingly, the Judges invite the 

Participants to include, in their 

proffered evidence, testimony, and/or 

arguments, a discussion of their 

understanding of the ‘‘intrinsic’’ value, 

if any, of a performance of a sound 

recording, and how it might not be 

embodied in a royalty rate calculated as 

a percentage of webcaster revenue. 

c. Would a royalty rate calculated as a 

percentage of webcasters’ revenue be 

‘‘disproportionate’’ to webcasters’ use of 

sound recordings? 

In Web II, the Judges also expressed 

concern regarding whether a disparity 

could arise between a royalty rate 

calculated as a percentage of webcaster 

royalty and webcaster use of sound 

recordings. Id. The present Judges share 

that concern. 

Specifically, the Judges inquire 

whether ‘‘disproportionality’’ could 

arise if some webcasters declined to 

attempt to maximize profits, and instead 

attempted to maximize market share. 

Licensors then would suffer the 

‘‘opportunity cost’’ of foregone 

revenues. Cf. William Baumol, The Free 

Market Innovation Machine 221 (2002) 

(licensors must consider not only the 

marginal dollar cost, but also the 

‘‘opportunity cost’’ of granting a 

licensing to a given licensee). As noted 

by one of SoundExchange’s economic 

experts during the proceedings in Web 

III, Dr. Janusz Ordover, both of these 

reactions—profit maximization and 

market share maximization—would be 

possible outcomes. Ordover WRT at 

¶¶ 25–26. 

The Judges also seek evidence, 

testimony and argument on whether this 

risk could be mitigated by combining a 

percentage-of-revenue based royalty rate 

with a significant minimum fee. See 

H.R. Rep. No. 105–796, at 85–86 (1998) 

(Conf. Rep.) (‘‘A minimum fee should 

ensure that copyright owners are fairly 

compensated in the event that other 

methodologies for setting rates might 

deny copyright owners an adequate 

royalty. For example . . . a minimum 

fee [should be set] that guarantees that 

a reasonable royalty rate is not 

diminished by different types of 

marketing practices or contractual 

relationships. . . . [I]f the base royalty 

for a service were a percentage of 

revenues, the minimum fee might be a 

flat rate per year (or a flat rate per 

subscription per year for a new 

subscription service’’) (emphasis added). 

Accordingly, the Judges invite the 

Participants to include, in their 

proffered evidence, testimony, and/or 

arguments, a discussion of the problem 

of ‘‘disproportionality’’ between a 

royalty rate based upon a percentage of 

webcaster revenue and the use by 

webcasters of sound recordings, 

including the details identified supra. 

Petitions To Participate 

Parties with a significant interest must 

file Petitions to Participate (PTP) in 

accordance with 37 CFR 351.1(b)(1). 

PTPs must be accompanied by the $150 

filing fee in the form of check or money 

order payable to ‘‘Copyright Royalty 

Board;’’ cash will not be accepted. 

The Judges will address scheduling 

and further procedural matters after 

receiving PTPs. 

Dated: December 20, 2013. 

Suzanne M. Barnett, 

Chief Copyright Royalty Judge. 

[FR Doc. 2013–30917 Filed 1–2–14; 8:45 am] 

BILLING CODE 1410–72–P 

POSTAL REGULATORY COMMISSION 

[Docket No. CP2014–21; Order No. 1929] 

New Postal Product 

AGENCY: Postal Regulatory Commission. 

ACTION: Notice. 

SUMMARY: The Commission is noticing a 

recent Postal Service filing concerning a 

contract with Hongkong Post for the 

delivery of inbound Air CP. This notice 

informs the public of the filing, invites 

public comment, and takes other 

administrative steps. 

DATES: Comments are due: January 3, 

2014. 

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